EPAs can be a boon for Africa if crafted properly, International Trade Centre’s Gonzalez says

18/07/2014 by Views: 18

Last week, 18 West African countries inked the first Economic Partnership Agreements (EPA) with the European Union (EU). Four more EPAs are expected to be signed in Africa. The negotiations process was long and the EU has been criticised for not handling African’s sensitivities properly.

In an interview with Borderlex’s Jennifer Freedman, Arancha Gonzalez, the executive director of the International Trade Centre, the joint World Trade Organization and United Nation body that helps developing countries boost exports, says EPAS can bring significant benefits to African countries, provided they are shaped in a way that takes into account their specific needs.

“There is no such thing as EPAs being good or bad in the abstract,” Gonzalez said during an interview in her Geneva office. “It all depends on whether the EPAs are crafted to the specificities of the bloc with whom you’re doing the EPA, and whether or not the EPAs are accompanied with a set of measures aimed at assisting the actors in the African continent to build the capacity to diversify and add value in-country.”

The EU originally aimed to cobble together partnership agreements with West Africa, Central Africa, Eastern and Southern Africa (ESA), the Eastern African Community (EAC), and the South African Development Community (SADC). West African leaders recently approved their EPA – though it still requires ratification — and the EAC and SADC may be next in line. It is understood that discussions with those two blocs now focus on just two key issues: export taxes and agricultural safeguards in the case of SADC, and export taxes and EU domestic agricultural support in the case of the EAC.

The accords aim to cover “substantially all trade” in goods – meaning in this case at least 80 percent – as well as services, investment and trade-related rules, with a view to fostering the integration of African countries into the world economy and promoting their sustainable development.

Gonzalez identified two key hurdles for the African continent: a lack of diversification and limited value addition. African exports are typically commodities and raw materials – such as crude oil and diamonds from Angola, aluminium and cocoa beans from Cameroon, beef from Namibia, and tobacco and tea from Mali — rather than domestically-processed goods. This creates problems, because it hinders the goal of African countries to add value to their exports, Gonzalez said.

“For me, a good policy for Africa is one that accompanies opening trade with building the capacity to do more domestic transformation and greater diversification,” she told Borderlex. “This means two very concrete things. One is that industrialization in Africa has to be necessarily about intelligently blending manufacturing, agro-processing and services.”

Industrialization based solely on manufacturing is no longer viable, for Africa or elsewhere, Gonzalez said. “It’s not a recipe that works in the 21st century, when two-thirds of our economies are services-driven and services-based, and certainly doesn’t work for many countries in Africa that have very clear limitations in terms of geographical position.”

Trade in West Africa, whose leaders formally approved the region’s EPA last week after more than a decade of negotiations with the EU, highlights Gonzalez’s point that greater variety of exports is needed. Minerals and fuels comprise 70 percent of West African exports to Europe, with cocoa beans adding another 15 percent. This reliance on commodities hinders efforts to shore up the region’s economies and create jobs – both goals of the EPAs.

“That tells you that that trade agreement between the EU and West Africa has to be crafted not to perpetuate a trade relationship where Europe imports raw materials from West Africa,” Gonzalez said. “It has to provide an opportunity for the integration of the region as such, and the fact that the agreement is being done with the region is a good thing, but also respectful that it has to be about the diversification of the African economies.”

Creating Value

EPAs must also encourage and enable Africa to add more value in-country, she said. “This means focusing a lot on capacity building of small and medium enterprises.”

The process will be a slow one, she said. Trade liberalisation in Africa must be a gradual process, and it will require more effort – in the case of the EPAs – on the part of the EU than of African nations, Gonzalez said.

“You don’t do a trade agreement with West Africa like you do a trade agreement between the EU and the US,” she noted. “In East or West Africa or Central Africa, it has to be with a phased-in programme, with an asymmetric programme, with the EU doing more than what the African region would do, and insisting a lot with regulating not just tariffs, but non-tariff barriers, which is the big obstacle to trade today.”

Gonzalez also advised the EU to “listen very carefully to what the African governments are saying” during negotiations on the trade agreements. Nigerian concerns that the planned EPA with West Africa might hurt its fledgling industries and jeopardise its development, for instance, threatened to scuttle the deal. But the EU agreed to renegotiate some of the agreement’s key provisions, leading Abuja to back down and sign off on the accord.

“African governments are not saying the EPAs are bad,” Gonzalez said. “What they are doing is negotiating the specifics of the trade opening and the specifics of the non-tariff barriers and the specifics of the accompanying measures. Where the haggling has been is on the details, the small print of this agreement.

Both sides have shown a good amount of flexibility during negotiations, she said. The EU in particular has moved from its original position. For instance, while Europe initially wanted West Africa to open almost 100 percent of its market, it later agreed that the region needs to ease trade in 80 percent. Europe also began with a transition period that was markedly shorter than what was ultimately agreed.

“There has been an adjustment process and that’s good, because it’s reflecting the realities of the countries in which it is operating,” Gonzalez said. “In my view, EPAs are good as long as they are crafted in the right way.”